About five days back I received a phone call from a bright and ambitious student attending my alma mater in quest of her business school degree and a dream job that would change her life forever. It wasn't too surprising then to hear about the usual suspects that any business school graduate would aspire as a stepping stone into the big bad and bountiful world of Indian financial markets. Be it private equity or banking or......private equity or banking, yes the list stops there as we flounder for choices.
In '04 when I was completing my graduation from engineering school, little did I know what to do next, I simply aspired to be in Finance. An year that also coincides with the first big bull run which commenced in the same year. Times were different then, the job markets were small, aspirants were numerous, information itself was scarce.......private equity was a never heard animal for young candidates such as me.
Let me break the situation for that student into 3 broad categories:
1. Aspiration and rewards
2. Skills and satisfaction
3. Growth and opportunities
The role of each of listed attributes seems self explanatory, however rational and irrational exuberance when one is studying or the peer pressure or certain success stories that are repeated in media are good enough reasons for anyone to come to quick conclusions about their future.
1. Aspiration and rewards: It is a chicken and an egg story, is finance job a means to high rewards or are the rewards which are seemingly high the reason for us to aspire to be in such jobs. Its difficult to address the conundrum, however the way I see Indian society, I feel the latter is true. No one is to be blamed for it, its good to have goals whether they are material is immaterial here! Though I would have no empirical data to back it, but it is a widely known fact that the amount of money bankers or investment analysts make is hardly challenged by other professions.
2. Skills and satisfaction: We Indians are analytical in nature. Numbers and making sense of them is deep rooted in our education, throw a spreadsheet on us and we would stuff it up with all sorts of scenarios but still emerge with a convoluted solution to any problem. I think this training of ours attracts us to finance which deals a lot of with numbers and financial models. Our intellectual curiosity is naturally satisfied after every successful run of the logics on excel models.
3. Growth and opportunities: I will talk from my personal experiences here. Financial markets were opening up in India in 2004, the talk of town was equities as they scaled new highs every year till 2008, private equity became more widespread and so was talk on bonds, ETFs, commodity exchanges etc etc. Opportunities galored in an emerging market which saw an advent of investors putting money wherever there was a requirement, be it trillion dollar infrastructure (this figure looks like a rolling target hardly to be achieved), millions of homes or fast expanding consumer good companies. Hence growth and opportunity were hand in hand, thereby allowing people to find a career or atleast aspire for a career in financial services which were to be backbone of this growth engine.
In the interest of brevity I will play a devil's advocate and share a perspective from where we are now to where we were some years back.
The slowdown which ensued in the aftermath of 2008 crisis, more specifically in India's case since 2012, when large scale misgovernance came in forefront has taken a toll on Indian financial markets. Local currency plunged to levels never seen, asset markets and security markets all took a beating (barring may be real estate and gold) while Inflation ate into household savings. Indian firms may not have laid off as many people as in western markets, but then there were far fewer number of firms which India ever hosted and the sector is still in formative years. Salary growth has remained stunted while in my assessment there has been net negative or small positive addition to workforce. However, I do see people gaining in some other sectors such as software development, marketing etc.
We may find finance to be highly analytical and demanding brains equivalent of rocket scientists to deal with tonnes of numbers and trends, but that's not even close to reality. Let me take an example of sell side equity research analyst, most of financial models are coded since years and any new analyst only puts in data to update numbers and scenarios. Same is the thing for corporate bankers and some others. Let me come to private equity, you are always on other side of the table equipped with a whip (your approval) to regard or disregard proposals. You may then end up freshly putting together spreadsheets to dig deeper into proposals, but that's not even half the work done. Private equity is about credibility, relationships and ability to market deals with your investment committees.
My first counter argument above also in some ways addresses the growth and opportunities aspects. Having said that I dont mean there wont be growth in this sector or there will be no rewards in pursuing a career in Indian financial markets, but all this will be stunted as employers are cautious more now than ever. Some firms have shut their shops in India most likely not to return in coming years.
Once a friend said to me "it is perplexing that intermediaries (read bankers, investors etc) make more money than those in core industry....i.e. people who give jobs to these intermediaries, this can not last", today I can say he was right.
Before I close I will briefly touch upon something which many private equity aspirants don't understand. The many successes which we read about came in pre 2008 era when credit was widely available and valuations were anything that would fly with a bigger fool. Also these so many stories which you come across were made with excessive leverage in western markets. The latter was never a case in India and unlikely it would ever be.
That said financial services will offer careers, a large number of thesewill come from new banks in India others may be far and few....
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